'Rent trap' keeping England's young people off the housing ladder

http://www.theguardian.com/money/2014/jul/23/rent-trap-keeps-young-off-housing-ladder

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Young people are being caught in a "rent trap", with housing costs taking up so much of their income that they are struggling to save enough to buy a home of their own, it was claimed on Wednesday, as figures showed tenants are paying more than homebuyers for the roof over their heads.

The government's official English Housing Survey showed that in 2012-13 the 4 million households in England's private rented sector paid an average of £163 a week for their homes, an increase of £10 since 2008-9, while the 7.2 million households buying their home through a mortgage paid £149.

Because owner-occupiers with mortgages also tended to earn more than those in the rented sector, tenants spent 40% of their income on rental payments, while owner-occupiers spent just 20%.

The report showed that in the wake of the financial crisis, when credit became more costly and lenders began asking for larger deposits from homebuyers, the proportion of young homeowners dropped. In 2008-9, 21% of households buying with a mortgage were aged below 35 but this fell to 18% in 2012-13.

Meanwhile the number of households aged 25-34 who were privately renting increased from 31% to 45%.

Campbell Robb, chief executive of the housing charity Shelter, said people were "finding themselves caught in the 'rent trap'".

"With homeownership now at its lowest level since the 1980s, our shortage of affordable homes is leaving more and more families with no choice by to bring up children in unstable and expensive privately rented homes."

David Orr, chief executive of the National Housing Federation, which represents housing associations, said there was "a widening gap between the haves and have nots" in England's housing market.

"More and more people on lower incomes now have no choice but to rent in the unstable private sector, paying increasing amounts for the privilege and leaving them little left over for the basics like food and energy bills," he said.

"To solve this problem and to end the housing crisis within a generation, we must build more of the right homes in the right places at the right price."

The campaign group Generation Rent said the results highlighted "tenant exploitation" and underlined the need for reforms to tenancy law.

The group's director, Alex Hilton, said: "Renters spend two days every week working to pay off their landlord's mortgage. This is a financial thumbscrew applied to people who simply have no other choice of tenure and it's hard to see how this can be characterised as anything other than exploitation."

The first results from the survey published in February revealed that homeownership had fallen to its lowest level in 25 years and that the number of households in the private rented sector had overtaken the number in social housing for the first time.

The new in-depth report showed that social tenants typically paid 30% of their disposable income on rent but were more likely to be satisfied with their tenure than private renters.

Just over half of private renters agreed that it was a good way of occupying a home, compared with 82% of social renters and 93% of owner occupiers.

The research also looked at the size of English homes and how many people lived there. It found under-occupation was more prevalent than overcrowding, with more than 8 million households (37%) living in under-occupied homes.

More than 7 million of these were owner occupied, accounting for half of all owner occupied households.

The under-occupied rate was lower in both the renting sectors – 15% in the private rented sector and 10% in the social rented sector.

In 2012, 94% of owner occupied dwellings had a private front and/or back garden compared with 67% of private rented, 61% of local authority and 63% of housing association dwellings.